Where you put your money matters, and if you want to drive positive change in society, investing ethically could help. Ethical investing could be a good way to give your money an opportunity to grow whilst supporting companies that are committed to doing good. So why aren’t more people taking the green path? Well, although ethical investing made its first appearance in the 18th century, there are still many misconceptions about it. For instance, it’s often assumed that it’s difficult to invest ethically and many people don’t know how to choose ethical investments. Building an ethical plan can sound like a big job, but it doesn’t need to be.
How difficult is it to pick ethical investments?
Picking your own ethical investments using a DIY platform is no easy task as there is a lot of research you could do before selecting anything. Not only is there a lot to read through, such the balance sheets of each company, but you may also want to check their ethical standards. How do you do this, you ask? You could start by having a look at their activities and practices. How do they impact the environment? Are they giving back to society? What about their internal policies? And how do they behave towards their shareholders? Also, are they implementing any measures to improve their standards?
Answering these types of questions will help you gauge the ethical status of your potential investments. Ultimately, the decision to include an investment or not will depend on your personal preferences and principles. So, before you take your pick, make sure you know your values, including what activities you want to exclude from your plan.
Once you’re done building your plan, you may want consider keeping a close eye on how the financial markets are doing as they can fluctuate, and if needed, you may need to adjust your portfolio to take advantage of the good days and shelter your investments from the bad days. Investing on your own could quickly become a full-time job, so if you want to pick your own investments, it's worth considering if you have the time to dedicate to this.
What’s an easy way to invest ethically?
If you’re too busy or not confident enough to pick your ethical investments by yourself, don’t worry, there are many ways that you could invest ethically without the hassle. For example, with digital investment platforms, like Wealthify, the hard work is done for you. You just need to tell us how much you want to invest and choose the risk level that suits you. We’ll do the investing. Your money will be invested in a number of ethical funds – think of them as hampers full of sustainable investments. Most funds will screen out organisations involved in harmful activities, including gambling, tobacco, adult entertainment, and weapons. Some funds will take the screening a bit further and exclude a larger number of sectors, such as animal testing and nuclear power. But it doesn’t stop there!
Many funds included in your Wealthify Ethical Plan will also perform ‘positive screening’, meaning they’ll proactively look for companies that are striving to have a positive impact on the environment and society. And to do this, fund managers will look at their ESG practices – ESG simply stands for ‘Environmental, Social, and Governance’ and it provides investment professionals with a list of criteria to measure the ethical impact of companies. In other words, fund managers will check things like how much waste a company produces, how diverse its workforce is, and how transparent it is when reporting to the public. Each company will receive an ESG score and the better rating they get, the more likely they are to be included in the fund. But it’s not just ‘best-of-breed’ companies that get to be included! Organisations which are working hard to improve their practices will also be considered. And that’s not all – fund managers will actively monitor any companies they include in their funds to ensure that high standards are maintained, and some will even push for change by using their influence and voting power to encourage organisations to work towards higher ethical standards. More importantly, at Wealthify, we will also keep a close eye on the funds we use to make sure your Plan(s) are truly ethical – and the best thing about it is that you don’t need to do any work!
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.